Dec. 29, 2011 | The Legislature giveth redevelopment agencies and the Legislature can taketh, ruled the State Supreme Court Thursday.

The court’s ruling to maintain the legality of Gov. Jerry Brown’s controversial plan to end redevelopment agencies and divert property tax revenue to the state will lead to a quick $1.7 billion fix to the state’s budget problems and deals a death blow to the ability of cities to fund public improvement projects.

Without RDA, Oakland’s Coliseum City
 proposal just got harder to fund.

The 6-1 decision ironically found illegal a companion law to the bill abolishing redevelopment meant to soften the blow for local cities.

Created by moderate Democrats in the Legislature to give cities the opportunity to pay for the right to keep their redevelopment agencies was found to be in violation of Proposition 22, the referendum disallowing Sacramento with balancing its budget with local dollars.

Conversely, the court applied Prop. 22 to its majority opinion, in effect, saying redevelopment was initially created by the Legislature and it maintained the right to dissolve it.

Chief Justice Tani Cantil-Sakauye, in both a concurring and dissenting opinion, said the court applied Prop. 22 too broadly.

With redevelopment agencies the stuff of history, there are some benefits and many takeaways from its demise.

Despite the negative connotations provided by detractors of Brown’s plan, the transfer of property taxes from cities to the state will eventually funnel back, albeit at lower amounts, and benefit state programs, while providing increased funding to school districts.

Although the agencies will go by the wayside and necessitate lay offs of personnel, projects currently under construction or shovel-ready will continue, if cities moved earlier this year to secure outside funding. A wind-down of a few years was included in the most recent budget deal taking some initial benefit away from schools.

In addition, a gaping $1.7 billion hole in the state’s budget was averted by the ruling. Still, lawmakers will again do battle next year with another multi-billion dollar budget shortfall.

In the East Bay, most municipalities are well-prepared to deal with the new reality of business with redevelopment agencies, if not with extreme objection. Fremont, for instance, approved $140 million bonds in March to maintain proposed projects in its downtown, including construction of a new BART station. The move to secure funding for projects also happened, to a far lesser extent, in Hayward, San Leandro and Alameda.

Local cities were also prepared to make the first installment of payments to the state in January to keep their agencies in operation. Because of the court’s ruling striking down the “pay-to-play” function of the law, that scenario no longer exists.

Hayward, an East Bay city particularly vengeful towards the governor’s plan, was scheduled to pay the state nearly $1 million in the first year to keep its redevelopment agency. Hayward’s mayor and city manager routinely described the state’s offer as “blackmail” and applied significant pressure to its representatives in the Legislature.

The future, though, is bleak for cities trying to spruce up their cities look or a move in a different direction through construction and growth. Critics of the plan say it will damage any hint of economic recovery possibly lurking in the near future along with the loss of thousands of jobs residing in the former agencies.

In gentrified cities like Oakland, redevelopment dollars had in the past help rejuvenate portions of its downtown and was thought to be a linchpin in building either one of two stadium complexes at the existing Coliseum or Jack London Square. Those projects will likely have to draw, more than ever, from the private sector to exist.

According to an East Bay Express article from earlier this year, Oakland’s problems are further impacted by its use of redevelopment dollars not only fund construction projects, but to balance its general fund and pay some city officials. Half of Mayor Jean Quan’s salary is fortified with redevelopment dollars, said the Express.

San Leandro’s plan to make its downtown area near the San Leandro BART station also revolved around redevelopment dollars as did Hayward’s to spruce up its dying retail area on Foothill Boulevard. In the past, redevelopment helped construct the city’s handsome City Hall.

Going forward, there lies the potential for lawmakers to find an alternative to redevelopment agencies through the legislative process. Even if that occurs, it may amount to a last ditch effort to gain something rather than nothing from today’s defeat and definitely far less than they would have otherwise gained with a different ruling.